Areas of Interest

Anywhere Sikochi

Anywhere (Siko) Sikochi is an assistant professor in the Accounting and Management unit, where he teaches the Financial Reporting and Control course in the MBA required curriculum. His research is directed at information disclosure, debt contracting, and credit risks associated with firm operations and organizational forms.

Professor Sikochi earned his PhD in business administration at the Penn State Smeal College of Business, where he taught financial accounting in the Executive MBA program. He previously received an MBA from the University of Virginia Darden School of Business. Before his graduate studies, Professor Sikochi worked at a branch of FTI Consulting and at Charles River Associates.

A native of Zimbabwe, Professor Sikochi came to the United States to attend Middlebury College, graduating with majors in economics and Russian. He is active in the EducationUSA United States Student Achievers Program, which helped him prepare for U.S. higher education. He is also engaged in the PhD Project, an organization with a mission to increase the diversity of U.S. business school faculty. He and his wife are parents of two daughters.

I examine how organizational complexity arising from fragmentation of the firm into multiple legal entities affects creditor recovery rates. I show that organizational complexity can diminish creditors’ ability to recover their claims upon borrower default. The greater the number of entities, the lower the creditor recoveries upon default of the parent company. Moreover, recovery is lower when the parent company is a holding company with significant overseas operations in countries with weak governance. Additional tests show that during a financial crisis when creditor recoveries are generally low, organizational complexity exacerbates creditor losses.

I document the causal link between shareholder litigation risk and cross-listed firms’ information environment by exploiting a quasi-natural experiment in the form of a reduction in litigation risk resulting from the 2010 Supreme Court ruling in Morrison v. National Australia Bank. I first show that the ruling reduced litigation risk faced by cross-listed firms as evidenced by lower directors’ and officers’ insurance premiums for Canadian firms after the ruling. I then show that the information environment deteriorated for cross-listed firms after the ruling. The results are more pronounced for firms with low U.S. share activity, in bad-news firm quarters, and for firms from countries with weak legal institutions. By implication, these findings suggest that improvements in foreign firms’ information environment upon listing in the U.S., as documented in prior literature, stem in part from the greater litigation risk associated with the U.S. listing.

Noble Group, founded in 1986, was a large commodities trader based in Hong Kong and listed on the Singapore Stock Exchange. In 2012, Noble shifted its business strategy towards an asset-light model. Under this model, Noble did not own mines or farms to produce commodities but built commodity sourcing capacity by working with and investing in producers in exchange for purchase and marketing contracts. Noble also worked with customers to secure supply contracts. Noble had a portfolio of 12,000 commodity contracts by end of 2014. The contracts were measured at fair value. Iceberg Research, an anonymous blog, released a series of reports starting in February 2015 alleging that Noble was too aggressive in its fair value accounting for contracts and investments in producers. Iceberg did not accuse Noble of fraud, but suggested that Noble’s profits and balance sheet were highly inflated and Noble was headed for disaster. Noble defended its accounting policies and hired PricewaterhouseCoopers (PwC) to provide an independent review of fair value measurement. PwC released a positive review of Noble’s accounting. However, questions remained whether Noble’s contracts and investments were overvalued. The case explores Noble’s business and investigates whether questions about its accounting practices were in the past following the attestation by PwC.